Madison Realty Capital provides $34M loan-on-loan for Warner Center redevelopment

CMBS debt on former Anthem Blue Cross office building took $66M loss last month

Los Angeles /
Jan.January 21, 2021 01:10 PM
Josh Zegen and rendering of 21555 Oxnard Street (iStock, Google Maps)
Josh Zegen and rendering of 21555 Oxnard Street (iStock, Google Maps)

Since losing its sole tenant over a year ago, a 450,000-square-foot Warner Center office building has been in dire financial straits, at one point seeing its appraised value slashed by 75 percent. But now things are looking up.

The $120 million CMBS loan on the property was repaid in December with a $66.4 million loss, according to Trepp.

And the property owner is now preparing to reposition the 13-story asset with an assist from Madison Realty Capital, which has provided $34 million loan-on-loan financing to a joint venture that bought the CMBS debt at a big discount.

Madison announced the loan deal. Its principal and co-founder, Josh Zegen, described the borrowers only as “two leading investment firms.” They are the same entities that purchased the CMBS loan on the building, at 21555 Oxnard Street.

Zegen said that Madison’s new income-oriented $1 billion lending vehicle has the flexibility to target deals backed by both performing and non-performing loans. The firm provided similar loan-on-loan financing for projects in New Jersey and New York in the past year, according to its website.

The Warner Center tower, also known as Center Point, may be converted by right into a 14 story, 197-unit multifamily property or be redeveloped into a more modern office building.

The building owner, TA/Warner Center Investors LLC, is a group that includes managing partners Abraham Lerner and Christopher Ellis, and limited partners Manfred Simchowitz and Apollo Real Estate Investment Fund, according to CMBS loan documents from 2007. Apollo’s stake is 72 percent.

The CMBS loan defaulted upon maturity in December 2019. At the time, sole tenant Anthem Blue Cross had just relocated to the Campus @ Warner Center, and the building owner was unable to pay off the debt. The value of the property, once pegged at $150 million, was slashed to just $39.1 million with a new appraisal in June.

“After widely marketing the defaulted mortgage loan for sale through a third party brokerage firm, bids were received and the a note sale was pursued with the highest bidder,” servicer commentary on the loan states. “However, the bidder failed to close the transaction.”

In the end, an option holder exercised a fair value purchase option in accordance with the loan’s pooling and servicing agreement, according to servicer commentary. Final liquidation proceeds came out to $57 million — a 55 percent loss, but not quite as bad as the June appraisal implied.

In 2018, soon after Anthem announced plans to relocate, Center Point was put on the market as a redevelopment opportunity, with brokers expecting it to fetch bids between $110 million and $125 million. In April 2019, the building owners were reported to be working with Lincoln Property Company on a $50 million repositioning of the property to attract media and tech tenants.

The Warner Center 2035 master plan, adopted by the city in 2013, encourages new, especially residential, development in this section of the San Fernando Valley that predominantly consists of office buildings and parking lots.






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